In this article, we will take a look at Yearn.Finance, one of the leading protocols in DeFi, which offers some of the highest annual percentage yields compared to various other DeFi protocols. We’ll briefly cover its features, the problems it tries to solve, and some of the recent events involving it.
What Is Yearn.Finance?
Today’s DeFi sector is still speculative and volatile. Low returns still affect the industry as they create an artificial barrier to adoption. Then, more often than not, new investors who are unfamiliar with DeFi may find its functionalities, standards, and overall profits confusing.
Here is where Yearn.Finance comes in as it aims to solve such problems through its various products. So Yearn is a suite of DeFi products based on the Ethereum blockchain. The platform hosts several income-generating tools and facilitates lending aggregation, insurance, and yield generation for users.
It allows users to maximize their yield through a process by which they deposit their assets, and the Yearn protocol executes investment strategies on different platforms in DeFi.
One of the most appealing aspects of this project is that the protocol is entirely decentralized. So there is no Yearn headquarters or a team of developers and leaders claiming ownership over the network. Instead, users help make decisions for the network through an internal decentralized autonomous organization (DAO).
Yearn.finance is the brainchild of Andre Cronje, with the platform being released in the middle of 2020. He built this platform after realizing that many DeFi protocols were too complex for a layman to understand and use. So he created a platform that DeFi enthusiasts can easily utilize. He was also the first one to put funds in Yearn’s pools.
Basically, Yearn enables users to deposit assets into a pool, and the algorithm executes the strategy of that pool so that users can then receive APR in return. The two main aspects that have made many turn to Yearn.Finance include:
- An automated process of maximizing yield that is combined with tax reduction.
- The fact that it simplifies a user’s interaction with DeFi.
Yearn is taking steps for the transition to a cross-chain platform. It has already extended the ecosystem to Fantom with more integrations with Layer-1 infrastructures planned to happen in the near future.
Yearn.Finance Features & Products
The platform offers several products that enable DeFi users to maximize their yield. The main products include:
- yVaults – This product includes several pools, and each pool comes with its own investment strategy. Vaults are like savings accounts for crypto assets. They accept a user’s deposit, then route it through strategies that seek out the highest yield available in DeFi. Once users deposit assets into any of the pools within yVaults, they receive a token representing their ownership of the deposited assets, so the locked assets. The performance fee is 20%, and there is a 2% management fee. The withdrawal fee from the vault was removed after the switch from v1 to v2.
- Earn – is a lending aggregator that seeks to attain the highest yield for supported coins at all times. Some of these coins are DAI, USDC, and USDT. To achieve this, it programmatically shifts these coins between several lending protocols, including AAVE, dYdX, and Compound.
- Zap is a product that facilitates asset swaps, making the entire process extremely easy for users. It reduces transaction costs by combining multiple transactions into one.
- yInsure – insurance for potential vulnerabilities in smart contracts.
Tokenomics
The YFI token is the main governance token of the Yearn Finance network. This ERC-20 token serves many purposes within the system. There is only a max supply of 36,666 YFI tokens. All of them are in circulation and in the protocol’s treasury, so there is no inflation by creating new coins.
The founding team received 0 coins in advance. There were no initial investors, and all the tokens were distributed in a fair and transparent way to the community by depositing assets in the first liquidity pools created.
Recent and Upcoming Events
One of the recent events that made the headlines was the network’s decision to begin its YFI buyback, so to repurchase the token from users. On December 16th, Yearn.Finance revealed in a tweet that it purchased around $7 million worth of YFI from the open market.
This move is a push from the network to improve its tokenomics and do a fee distribution to holders. The buyback has already led to massive gains for YFI, reaching even $39k on December 20th.
The project benefits from a strong community, having around 160k followers on Twitter, so many DeFi users see the project’s potential to deliver as promised.
Conclusions
Yearn Finance comes with a suite of products that offer many opportunities for users to maximize their earnings. The way the products are designed and the experience they ensure simplify the DeFi message so that everyone can join. It aims to enable and bring forth the core of DeFi, which is decentralization, so an endeavor definitely worth keeping an eye on.
What do you think about Yearn.Finance? Let us know your thoughts on this in the comments section.